He’s lived through the Great Depression, survived World War II, and weathered the investment storms of Black Monday, the tech bubble and the financial crisis.

Few investors have experienced as much as Jack Bogle, the pioneering champion of index investing and founder of the Vanguard Group, the world’s largest provider of mutual funds with $4 trillion in global assets under management.

Now, at age 87, the finance veteran is facing a world where a single tweet from President Donald Trump can shake stocks. But the numbers are in his favor: Over a 66-year career, Bogle has witnessed 13 U.S. presidencies and a fair number of market crashes. That’s a lot of hindsight to apply to the current political and financial environment.

“It’s hard for me to figure out how this period stands out in an awful lot of good ways,” Bogle told MarketWatch. “What the markets seems to be telling us here in the U.S. is that there are a few bullish things going on with the new administration, which is determined to borrow a lot of money to spend a lot of money.”

‘I don’t mean to be downbeat. I mean to be realistic.’
Jack Bogle

The big question for Bogle is how much of Trump’s tax and reform agenda will become reality. That’s the big unknown. But he does have an inkling of how things could go.

“My feeling is that anything that increases the gap in wealth in the U.S. is bad for our society and bad for markets. Anything that increases racial division here is bad for our economy,” he said

“So we’re having a battle between the short run and the long run. The short run is bullish, the long run more bearish.”

Given that, Bogle doesn’t see the next few years bringing stock gains anything like the average 11% rise across his career. Instead, investors should expect annual returns of around 4% for equities, he said. For bonds, returns could be lower.

“We are not going to have nirvana. We are going to have — I’m quite sure — profits and returns on stocks and bonds over the next decade. But they will be low,” he said.

But that downbeat prognosis is no reason to pause investing, Bogle said. He pointed to two of his key rules, formulated over the years:

“Presumably you are accumulating money now and putting money away for the future. Do not, under any circumstances, stop doing that. That is the first rule. Don’t stop investing,” he said.

“The second rule is, particularly for the younger people in the world: A good solid market decline is a blessing. You’ll be buying — if you invest each month — stocks at lower and lower prices. Don’t be antagonized by that; use that as an opportunity of a lifetime.”

The Vanguard veteran said investors should always be prepared for the market to fall by as much as 20% or even 30% — or more. Right now, U.S. stocks
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are up nearly 15% over the past 12 months and close to record highs. Given that they’re fully valued, a slump could come this year or next, Bogle suggested.

‘I have been, I think, too conservative, but I’m not bothered about it.’

Even if Bogle’s two rules sound simple to follow, people too often do exactly the opposite, he said. Instead of taking a disciplined path led by rational thinking, younger and less experienced investors let their emotions take over — particularly in times of stress.

“In a great bull market, people feel good, they feel optimistic, they want to invest more in stocks. If there’s a big bear market, people are scared to death and want to take money out of stocks,” he said. “They want to put extra money in at the highs and take money out at the lows — their investment program is going to be a total failure. So you need self-discipline.”

Marked by the Great Depression

The New Jersey native admitted, however, that he hasn’t always followed the best investment strategies. Born five months before the market crash of 1929, he was just a toddler as the U.S. economy plumbed the depths of the Great Depression, costing his family its nest egg and its home. His upbringing left a lasting mark on his attitude toward money, he explained, making him more conservative than he needed to be. For example, he has always had some money invested in the bond market, even when it would have been wiser to have thrown it all into stocks.

“I may have gotten rich over a long period of time, but I would have been better off with 100% in stocks to begin with,” Bogle said.

“But I don’t have any regrets about it. I’m just one more human being trying to accumulate money for retirement, for my kids’ college, etc. I have been, I think, too conservative, but I’m not bothered about it,” he said.

For young people, Bogle said he advises putting as much as 100% into stocks in their early years of investing, then gradually add more bonds until they have a 75%-25% distribution around their retirement age. For himself, he’s chosen a more risk-averse approach of a 50%-50% stocks-bonds split for retirement.

That’s because alongside those guidelines, people should seriously take into account their personality type, or pain threshold, when investing, he said. Overall, though, the idea is to not get caught up in the daily ups and downs of the market.

“Pay no attention to it at all. Your financial statement, your 401(k), your pension statement or whatever it is — don’t open it until you retire,” Bogle said.

“And when you open that retirement statement 50 years after you started, or whatever it might be, you really should have a cardiologist standing by. Because there’ll be so much money in there, you’ll be in a cardiac state.”

“It’s getting your emotions out and letting the economics of investing take over.”

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